NEW DELHI: NMDC's share sale programme for diluting 10 per cent of government's 90 per cent stake at Rs 147 a share commenced today at leading bourses.

The disinvestment through the offer for sale (OFS) route will close at 3.30 pm today and if fully-sold, it would fetch Rs 5,828 crore to the cash-pressed exchequer.

Brokerages are of the view that NMDC at current valuations is a 'steal' supported by attractive valuations with high growth potential and a good dividend payer.

"Keeping in view the price at which government is offloading its shares, we believe the stock is 'a steal' with attractive valuation," Microsec said in a report. The brokerage firm has assigned a 12-month target price of Rs 225 per share, translating into an upside of over 40 per cent from current levels.

The brokerage firm is of the view that NMDC is likely to grow at a CAGR of 13.48 per cent in terms of revenue and 12.67 per cent in terms of PAT over FY12-16.

At the floor price of Rs 147 - a significant discount to its closing price of Rs 159.30 on the Bombay Stock Exchange on Tuesday, ET reported.

"NMDC is valued at 8.2 times its trailing twelve months per share earnings - which is cheap when compared with other state-run miners such as MOIL, GMDC or Coal India, which trade at 10.8-14.7 times," added the report.

NMDC's valuations may appear expensive compared with Sesa Goa, which trades at a price to earnings multiple of 4.8 times, argue analysts.

We have compiled views and recommendations from various brokerages on NMDC FPO:

Microsec Capital: Recommends 'buy' with a 12-month target of Rs 225

NMDC is India's largest iron ore producer and exporter, presently producing about 27 MT of iron ore with 40 per cent market share in the iron ore producing industry.

Currently, the stock trades at P/E of 8.07x its FY13E EPS 19.18 and P/E of 6.87x its FY14e EPS 22.53. Microsec values NMDC at a premium to its peers on account of its huge reserves, higher margins backed by low cost of production, high iron ore quality, better visibility in earnings, market leadership in domestic iron ore space and improving cash balance despite huge capex.

The brokerage firm valued the stock by assigning a P/E multiple of 10x FY14e EPS of 22.53 and arrived at a target price of Rs 225 per share .i.e. an upside of over 40 per cent from the current market price.

Barclays: Recommends 'buy' with a target price of Rs 210

Barclays has also upgraded NMDC from underweight to overweight. The brokerage has also upped the price target from Rs 173 to Rs 210.

The brokerage firm feels India's iron ore industry is poised for a structural shift as output falls and demand increases. Barclays expects pricing dynamics to shift in favour of miners.

Macquarie: Recommends 'buy' with a 12-month target price of Rs 238

Government has been looking to divest 10 per cent of equity and has now fixed the price band. At the higher end of the band, the stock is trading at just 3.2x EV/EBITDA on FY14E as compared to an average of 5.5x for its global peers with little iron ore pricing risk.

Macquarie thinks it is a great opportunity for long-term investors to get exposure to rising iron ore scarcity in India. Reiterate 'Outperform' on the stock with a 12-month target price of Rs 238.

NMDC stock seems to have bottomed out and so does iron ore prices. The research house expects NMDC to probably take a price hike in January, which should set the tone for re-rating. Subscribing to the issue is highly recommended.

NMDC is still pricing 65 per cent of its production, which is iron ore fines at just US$55/t, which is a steep discount to the US$120+ international price. We expect NMDC pricing to gradually improve over the next few years to reach global price parity as India adds 45mnt of iron ore pellet capacity to utilise these fines domestically.

Secondly, iron ore mine closures relating to environmental and legal issues in India have been limiting supplies in the country, down 80mnt in the last year!

HSBC: Upgrade to 'neutral' rating with a target price of Rs 170

NMDC has underperformed the Sensex by 27 per cent over last year. However, the stock's free float is likely to expand by USD1bn if the follow on public offer is successful.

HSBC believes the downside risk is limited for NMDC given the domestic demand-supply imbalance support. The research house therefore increase EV/EBITDA multiples for NMDC to 6X (was 5X) and rating to Neutral from underperform.

The research house also upgrades its target price to Rs170 from Rs 150 earlier.

Angel Broking: Recommends 'buy' with a target price of Rs 198

NMDC is one of the lowest cost producers of iron ore on account of its highly mechanized and high-grade iron ore mines and logistical efficiencies.

Further, NMDC unlike other PSUs such as SAIL and Coal India does not face issues of overstaffing. NMDC also intends to diversify its operations by moving downstream through establishing steel plants and pellet plants.

Accordingly, the company aims to build an integrated 3mn tonne steel plant in Jagdalpur, Chhattisgarh with a capex of Rs 15,525cr. Over the past five years, NMDC has traded at an average EV/EBITDA of 11.1x, compared to its floor price (Rs 147 per share) valuation of 3.6x FY2014E EV/EBITDA.

A strong balance sheet, presence in sellers market (iron ore), low cost of production, high-grade mines and long mine life make NMDC an attractive bet in our view.

Valuing the stock at 5.5x FY2014E EV/EBITDA, we derive a fair price of Rs 198 and recommend investors to Subscribe to the issue.

(The views and recommendations expressed in this section are the analysts' own and do not represent those of EconomicTimes.com)